FALSE: The focus of ESG is only accelerating. According to data from Morningstar the European sustainable fund crossed £800bn of assets under management in the third quarter of 2020 (a 10% increase from the previous quarter). Sustainable fund assets now make up 9.3% of total European assets.
A major contributor to the increase in assets under management is the increased availability of ESG products, Morningstar have identified a further 105 new ESG funds emerging in the third quarter of 2020. During the third quarter three new green bond funds were also launched and two new products targeting ocean health one of which was BNP Paribas Easy - ECPI Global ESG Blue Economy. This is a step change, with funds becoming much more innovative in how they truly become more responsible in their investments to protect the wider prosperity and sustainability of the global economy.
FALSE: COVID-19 has had the biggest impact on the social aspect of people’s livelihoods. With everyone confined to their homes, social issues didn’t seem relevant, but that wasn’t completely true. Social issues such as mental health and employee wellbeing were more important than ever. COVID-19 pushed human capital under the spotlight. According to the latest BNP Paribas Asset Management survey, although all three ESG factors have increased in importance during 2020, the social criteria has had a notable increase (rising by 20pp). Furthermore, 79% of respondents believe social considerations will have a positive impact on long-term investment performance and risk management. Despite the economic and financial shock of COVID-19 businesses and investors have only increased their appetite to incorporate ESG.
FALSE: Implementing ESG can seem costly, but it will essentially come down to whether the cost outweighs the losses of not incorporating ESG. Adopting ESG has become somewhat easier as regulators are becoming much clearer in their framework. Governments, both the EU and UK have introduced support for financing of green projects and tax breaks for sustainability related projects. In addition, MSCI conducted a study, correlating the monthly industry adjusted ESG scores with the cost of capital and found, companies with high ESG scores experienced lower costs of capital. Similarly, the findings revealed the average cost of debt of a high ESG rated company was lower than that of low ranked ESG rated company.